Question

The assets of Dallas & Associates consist entirely of current assets and net plant and equipment. The firm has total assets of $2.4 million and net plant and equipment equals $2.1 million. It has notes payable of $140,000, long-term debt of $753,000, and total common equity of $1.45 million. The firm does have accounts payable and accruals on its balance sheet. The firm only finances with debt and common equity, so it has no preferred stock on its balance sheet.

Write out your answers completely. For example, 25 million should be entered as 25,000,000. Enter negative amounts, if any, with a minus sign.

1. What is the company's total debt?
     $
2. 
   
3. What is the amount of total liabilities and equity that appears on the firm's balance sheet?
   $  
4. 
   
5. What is the balance of current assets on the firm's balance sheet?
   $  
6. 
   
7. What is the balance of current liabilities on the firm's balance sheet?
   $  
8. 
   
9. What is the amount of accounts payable and accruals on its balance sheet? [Hint: Consider this as a single line item on the firm's balance sheet.]
   $  
10. 
    
11. What is the firm's net working capital?
    $  
12. 
    
13. What is the firm's net operating working capital?
    $  
14. 
    
15. What is the monetary difference between your answers to part f and g?
    $  
    
    What does this difference indicate?
    -Select-The difference indicates Notes payable balanceThe difference indicates Accounts payable balanceThe difference indicates Current liabilities balance

Answer 1

(a) Calculation of Total Debt

Total Assets = 2400000

Total common equity = 1450000

Total Assets = Total common equity + Total Debt

Total Debt = Total Assets - Total common equity

Total debt = 2400000 - 1450000

950000

So, Total debt is $ 950,000

(b) Calculation of Total Liabilities and equity

Total Assets = Total liabilities and quity

Total assets = 2400000

So, Total liabilites and equity is $ 2,400,000.

(c ) Calculation of Current Assets

Total assets = 2400000

Net plant and equipment = 2100000

Total assets = Net plant and equipments + Current Assets

So, Current Assets = Total assets - Net plant and equipment

Current assets = 2400000 - 2100000

300000

So, Current Assets is $300,000.

(d) Calculation of Current liablities

Total Debt or liabilities = Long term debt + Current liabilities

So, Current liabilities = Total debt - Long term debt

Total debt as calculated above is 950000

Long term debt = 753000

Current liabilities = 950000 - 753000

197000

So, Current liabilities is $197000

(e) Calculation of accounts payable and accruals

Current liabilities = Notes payable + Accounts payable and accruals

Accounts liabilities and accruals = Current liabilities - notes payable

197000-140000

57000

So, accounts payable and accruals is $57000

(f) Calculation of net working capital

Current Assets = 300000

Current liabilities = 197000

Net working capital = Current Assets - Current liabilities

300000-197000

103000

So, net working capital is $103000

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